Three Views on Japan

11/28/2003 12:00 am EST

Focus:

Japan's economic woes of the past decade are no secret. But some of the leading advisors see better prospects ahead. Here, a trio of technical and fundamental experts - Jim Stack, Richard Rhodes, and Richard Moroney - offer their top picks on Japan. (For more information on the advisors cited below, please click on their photo.)

Stack, James"We have increased our allocation to the Japan Fund (SJPNX) to 5% of our portfolios," says Jim Stack, editor of InvesTech Market Analyst. "This not only provides stability, but we expect the position to be profitable as well. The Japanese economy, which has spent much of the past decade mired in rolling recessions, appears to finally be in recovery. While the improving economy may explain the rebound in Japan’s Nikkei Index, gains in the Japan Fund have proven much greater. One reason is the active management of the fund, but another is the beneficial gain from the strong Yen (falling dollar). That’s why we’ve increased our allocation to the fund – as a defensive hedge against dollar weakness, which we feel is destined to persist."

Rhodes, Richard "We are now focusing on the theme of buying Japanese shares," says Richard Rhodes, editor of The Rhodes Report. "The recovery in Asia is progressing fairly nicely. Strategically, we believe Japan will continue to outperform the US. Below we list the American Depository Receipts, traded on the US exchanges, which can benefit from this theme. The Japanese equity market decline of 12.7% from the highs has 'piqued our interest' as it shall soon become oversold – and thus our propensity is to become a buyer into support levels."

Canon (CAJ NYSE) Technology Hardware & Equipment
Fuji Photo & Film (FUJIY NASDAQ) Leisure Goods & Services
Honda Motor (HMC NYSE) Auto Manufacturer
Internet Initiative (IIJIE NASDAQ) Technology Services
Kyocera Corp. (KYO NYSE) Electrical Component & Equipment
Nippon Telegraph (NTT NYSE) Fixed Line Communication
Nomura Holdings (NMR NYSE) Investment Services
NTT DoCoMo (DCM NYSE) Wireless Communication
ORIX Corp. (IX NYSE) Diversified Financial
Sony (SNE NYSE) Leisure Goods & Services
Toyota (TM NYSE) Auto Manufacturer

Moroney, RichardRichard Moroney, editor of Dow Theory Forecasts, says, "AFLAC ( AFL NYSE) notched solid September quarter results. Excluding changes in the value of investments, earnings per share were $0.47, up from $0.40 a year earlier and a penny above Wall Street expectations. While annualized premium sales grew just 1% in the US, they climbed nearly 16% in Japan. AFLAC, a leading provider of supplemental insurance, is the largest foreign insurance company in Japan. More than 70% of the company's sales and earnings come from Japan. The investment case for AFLAC is fairly simple: individuals in the US and overseas face increasing medical costs coupled with a reduction in benefits. Particularly robust demand in Japan should fuel sales and earnings growth through 2005. For full year 2003, AFLAC expects operating earnings to climb 17%, excluding the impact of foreign exchange. For 2004 and 2005, the company targets 15% to 17% profit growth. AFL is a long-term buy."

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